we've been all over the map. a lot of earnings hitting the tape during the show a lot of changes changing. plus, the ecb decision the s&p is indicated up about 1.25 points right now. the euro 111 after the draghi comments euro stocks, we're not going to look at those because we don't have time. "squawk on the street" is next good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. it is peak day for earnings. more than 60 members of the s&p report we'll get to 3m, southwest, comcast, place facebook, tesla, fort, and more from last night europe is green, ecb going more dovish today back home, our ten year holding on to a two handle as durables and claims are better than expected

our road map begins with the earnings deluge. the busiest day yet with 3m, comcast, dow crossing the tape >> plus, tesla shares tanking this morning despite record deliveries of its electric cars. the automaker did report a larger than expected loss. >> and max pressures southwest shares falling sharply ahead of the bell. love's gary kelly will join us exclusively this hour. stocks set to make new record highs with two big movers today. tesla, a larger than expected loss for q-2 margins down despite record deliveries of course, facebook beating on both the top and the bottom lines, but with that warning that growth will slow. results include a $2 billion charge as part of the $5 billion settlement with the ftc as facebook resolves one probe, disclosing yet another, saying the ftc began an anti-trust review in june, which is separate from the anti-trust review of big tech companies just launched by the doj there's plenty to choose from this morning, jim.

what's on your mind? >> i love the facebook call. i did. 28% revenue growth for a huge company that is under fire >> well, constant currency, looking here, 32 >> incredible. >> first revenue acceleration in three years. >> and it really was beautiful the thing that's most interesting is there are people who are chiding them for saying they're going to have to spend a lot more money on privacy. let me ask you, was that the day to say you're going to scrimp on privacy? this would be like a hotel chain saying, listen, we got to start cutting back on fire prevention. suboptimal so this was the day to be basically just saying, look, it's going to take time. it's going to take space there was everything that he threw. zuckerberg basically said, we're going to spend a lot of money, put a lot of people in this is the thing we take most seriously. then everybody else said it. whenever they came back to it,

it was always, this is what we're going to do. you could ask them, how about the ad units how are they doing well, we're concerned about privacy. so they had the mantra they stayed on message, and the stock is up. they did everything they're supposed to do great revenues, talked about how they had to spend more money on privacy. libra, listen, it's a work in progress it's early with libra. i'm almost going to say there's no flaws in that quarter >> what about daus in the u.s. and canada year on year, 187 versus 185 >> the rest of the world -- i mean, facebook ought to -- if i were facebook -- wow if i were king i'd move i would actually move the company. >> out of the united states? >> yeah, because if they're going to -- i mean, what no one's ever done this. i asked citi to move to mexico city at one point. >> many of our companies did do

it we had a craze for a while to avoid taxes. >> it was a mail drop in an irish hotel. >> no, of course they're not going to >> they're not going to. my wife is an irish citizen. it was easy to change. >> up in of that's going to happen >> will you listen to me for a second >> i listen to you every day doesn't mean i believe you >> good. i listen to you. big interview with sprint. i think facebook is right now instagram. there was a moment where they were off their message of how we're going to be the greatest privacy people we're privacy, privacy, privacy. sheryl sandberg talks about how mcdonald's, which reports tomorrow, had a huge lift when they did a campaign. huge lift. now, that's what i want. mcdonald's it was the best. >> and to the point that we've made numerous times, it's not as though despite all of the problems that they've run into that the customers are leaving >> customers love instagram more >> whether or not it is the advertisers who obviously are

paying them or the people who are using the service. daus, of course, carl referenced it, but we're talking overall 2.1 billion people now use facebook, instagram, whatsapp, or messenger every day >> every day they're fixated on it. i just think that was the story. that and the fact -- it's very interesting. they did not show a lot of leg when it comes to advertising, but their advertising units, as they said, are killing -- what what do you think they're killing now? us, tv >> tv is doing all right the up fronts were great >> david -- >> people still want a tv buy. >> if i were kraft-heinz -- oh, god, no. i'm not kraft-heinz. >> clorox. >> clorox. >> the cmo just gave an interview this week about why targeting on facebook remains so effective. >> and it's an all-time high, even though they didn't do that

great on quarter if i were a consumer packaged goods company, if i were james quincy, i would just say, okay, listen, for every ad unit -- by the way, she even talked about how the ad units, where you have to put the surprise. she talked about how to make an internet ad that works she shined on that quarter she shined on the conference call she was a bright shining light >> really? >> yes, she was. >> like that great vietnam book. >> john paul van she's gone from bright shining lie to bright shining light. i got to tell you, david, that was the takeaway if you want to advertise, mcdonald's, burger king, red lobster -- >> their head count goes up. >> they need another 10,000 just for privacy. they should bug the place. >> is it a better quarter than microsoft's? >> oh, my god.

there are people who are upset with me because i said unbelievable things about satya in i didn't use enough superlatives >> who would those people be >> satya is, i don't know, he's not george washington. adams? no, sam adams is doing great because of that sparkling seltzer. there are three people who wear dirty old t-shirts to work and they've all shined who are they >> john ledger >> you just interviewed one. >> satya nadella >> well, zuckerberg wears a tee. >> he wears a hoodie he has to start looking -- but these three guys are masterful it's incredible. t-shirted men. it's the way of the future >> nobody's ever seen you in a t-shirt. >> i don't wear a t-shirt. i sleep in this. >> jobs did it first

no doubt about that. turtleneck, but still. >> you know who wore a turtleneck after who was the greatest pretender of our life? >> elizabeth holmes. >> wow sartorial analysis per share there's a way to look at things. you see that stock was at 83 yesterday? he fooled everyone i remember him standing here and saying, cramer, cramer, i got to tell you, you are going to be dead wrong we're going to prove this deal and the stock is going to go up. >> so jim, whether it's facebook, unilever's growth, inbev, their growth, and why is draghi talking about significant monetary stimulus? german bund goes to minus 41 basis points today, a new record >> don't we go to 1.5? >> i don't know where we go. >> boy, i tell you, you're a consumer packaged goods company with a decent yield, i revere you. i revere you

coca-cola, really unbelievable >> unilever turned in a 9% quarter. >> does that mean paul wasn't as good as the new ceo? this is what people say about coe c coe c coe c-- coca-cola >> i can't even get premium. that's how hot premium is. >> the bud numbers coming out of nowhere given what the trend has been they were going ipo asia and pulled it. >> i think it was an amazing quarter. i think maybe they're coming back to beer the beer category has been not flat but negative. it does say that the people who were on molson, they're an ill-advised group down there >> two other moves 3m did beat on top and bottom

line health care up 5.8 ford fell short. revenue came in above estimates though almost all of the second quarter profit did come from north america, thanks to pickups they gave a lower than expected full-year forecast i was mentioning the week that autos have had between the nissan layoffs announced, ford, obviously tesla. >> go read the dow i want jay powell to turn it up right now. he should turn it up housing, not good. autos, not good. >> we just spent ten minutes about how companies are crushing it >> monday, tuesday, i wasn't even here. you were like, no, no. >> consumer is strong. >> that's what you keep saying >> over two-thirds of the u.s. economy. >> okay. i think most of the companies that are involved in industrial -- i'd say half of them blame the president, and the other half blame powell.

those are the demons they're demonizing those two gentlemen. i'm not kidding. because they're industrial the industrial economy is weak >> 3m? >> here's 3m i think the headlines are easy to read, but removing all the ongoing noise, the second quarter was essentially in line with our below consensus estimate and a bit weaker than normal seasonality >> two sub >> yes, even before we hear from 3m i want to hear about ground water. ground water is the issue. the headlines do not address ground water health care did have a reacceleration >> you're referring to the potential liability from these mounting cases and the litigation involving the pollution of ground water by -- what is it pfas >> it's the stuff from like scotch guard >> it's only made in any number of states, but i think it's

40-some-odd states >> no, not that much david, what, do you work for green peace or something no, fewer states than that georgia is bad my home state of new jersey could be a problem minnesota, they solved let's see on the call if they really, really are gunning >> before we -- can we talk tesla briefly? >> why not >> obviously you always listen to, read the call. what do we make of -- i mean, sometimes you need to step back. certainly musk wanted to when he said it's a mad thing to make as many cars in a year as we made in our entire history. he said it's difficult for people to really feel an exponential -- >> he used exponential twice >> we can feel linear. he's talking about the evolution of the species we don't feel exponentially. we can only sense linear growth.

so we're not understanding the exponential at a cognitive level. >> i felt like a nematoad. so there's a real question as opposed to carnut.com and the other people on the call tony asks, why are you confident? look at this answer. this is musk in a nutshell he goes, okay, you want to know? i think demand in q-3 will exceed q-2 it has this far. we'll see acceleration i think q-4 will be strong we expect quarter over quarter -- q-1 next year will be tough. i think q-3 and 4 will be good then i would say q-3 and q-4 next year will be incredible he's making fun of tony. he's basically saying, tony, you're a nematode.

>> he called you a simulation. >> big deal. tony asks the most serious question this is one of the great answers of all time. it's going to be incredible. who says that stuff? not ford motor, i'll tell you that much. >> no. we're going to watch tesla's price action too, which is not good premarket when we come back, obviously a bunch of other movers to get to, including southwest. airlines results pressured by the max. getting out of newark. we're going to talk to gary kelly. we'll get to comcast, american, paypal, align. jim's got that tonight futures looking still pretty good dow only needs 89 points for a record close back in a minute . small things. big things. too hard to do alone things. day after day, you need to get it all done. and here to listen and help you through it all is bank of america. with the expertise and know-how you need

to reach that blissful state of done-ness. so let's get after it. ♪ everything is all right what would you like the power to do?® ♪ all right what would you like the power to do?® (indistthat was awful.tering) why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade.

here, hello! starts with -hi!mple... how can i help? a data plan for everyone. everyone? everyone. let's send to everyone! [ camera clicking ] wifi up there? -ahhh. sure, why not? how'd he get out?! a camera might figure it out.

that was easy! glad i could help. at xfinity, we're here to make life simple. easy. awesome. so come ask, shop, discover at your xfinity store today. all right. welcome back we are expecting, as we reported yesterday and weeks past, that a consent decree will be entered into by t-mobile and sprint in order to get the approval of the justice department for their potential deal we've gone over a lot of the details of that consent decree, of course, as it will be entered into perhaps as soon as later today unclear at this point, though. the timing can be a bit tricky but it's going to allow the deal to potentially move forward, although you still have 13 states and the district of columbia still challenging the deal from an anti-competitive point of view, saying it will not be good for consumers. very much unclear as to how the

state's cases are going to fair, if and when we get this consent decree from the department of justice. interesting to note that the doj itself may have been a bit tougher, perhaps, than it otherwise would have been because the states were there, and it felt like it needed to get a strong consent decree in order to potentially overcome some of their opposition very rare to see the doj say one thing and then states prevail. i don't think it's been done, perhaps since 1940 so we have to wait and see on that, which means of course this deal is not going to close until at least the fourth quarter of this year. but you can see the movement in the stocks interesting, dish, guys, which we spoke about yesterday and spent some time on you liked and i understand why but the biggest loser here is dish network, in a note this morning, or rather dish network's investors. over the next year, dish valuations, which today are universally based on price per pop. now they're saying, hey, they're going to become a real wireless

company. so you're going to replace that price per pop with a discounted flow valuation of the wireless operating business and guess what, costs a lot of money to do that they say as well, you know, a $20 billion valuation on a dcf for a business that doesn't yet exist, considering sprint has been in business 20 years plus and still doesn't generate positive cash flow the hope is sprint will now generate positive cash flow. its parent company softbank will own 27% of the combined t-mobile/sprint. they are still talking about $43 billion net present value synergies, roughly 6 billion annually enormous numbers, of course. and they're talking very aggressively about challenging the incumbents in 5g and bringing 5g to the home, which they say is going to also eventually challenge the likes of comcast and charter in terms of providing broadband >> well, look, i know he downgrades dish to sell. i was hoping he would talk about

deep pocketed partners who could come in. he really just acts as if this is going to do it on its own i don't think that's clear >> that's a very good point. if amazon shows up as a partner -- >> exactly >> who knows of course, people will then worry that amazon conceivably -- and again, this is speculation i want to make that clear. amazon would fund it to no end and ruin pricing across the board. >> i think he's looking at it as a snapshot the one he says is also a winner is one starting to complicate the whole equation, at&t at&t is quietly moving up, step by step, inch by inch. >> upgrade today, right? >> yes randall stephenson is starting to look a little more visionary-ish. >> credit suisse from neutral to underperform >> to the extent they're going to do 28 billion in free cash flow, as they got into

yesterday. that's been the concern. they're taking debt down from what had been 180 billion to perhaps as slows a 150 billion all of that said, i don't know >> no. >> i don't know. >> what do you mean? >> they lost 778,000 subs in directv alone in a quarter >> you're exponential. this is a good deal, at&t. and "game of thrones," what can i tell you >> "game of thrones" is over, my friend done >> he's wrong. at&t is good >> well, thanks for the note we'll get cramer's mad dash and countdown to the opening bell. take one more look at the futures as we are still on track for the third positive week in four, although these futures have lost some gains back in a minute

oh, wow. you two are going to have such a great trip. yeah, have fun! thanks to you, we will. aw, stop. this is why voya helps reach today's goals... ...all while helping you to and through retirement. um, you guys are just going for a week, right? yeah! that's right. can you help with these? oh... um, we're more of the plan,

invest and protect kind of help... sorry, little paws, so. but have fun! send a postcard! voya. helping you to and through retirement. it's my special friend, antonio. his luxurious fur calms my nerves when i'm worried about moving into our new apartment. why don't we just ask geico for help with renters insurance? i didn't know geico helps with renters insurance. yeah, and we could save a bunch too. antonio! fetch computer! antonio? i'll get it. get to know geico and see how much you could save on renters insurance.

oh, it's so exciting time for mad dash. we only have six minutes you better move fast on this mad dash paypal >> listen, paypal has been the star of the show in payment processing it's been amazing. it's a red-hot group i don't know if you saw -- but these are reversed people said it was bad, ridiculous it was good. last night, dan schulman, some thought cavalierly, said products were going to be delayed. some were saying dan has become quite arrogant i think they're wrong. dan is saying, listen, it wasn't the blowout quarter. we got to guide revenue down then don't worry, it's going to come right back. i think that's right david, paypal is the anti-libra. it is the revered payments processing company again, i know facebook doesn't want to buy anyone i know the stock has become too big to buy >> this is enormous.

remember when they were splitting it from ebay >> it's 20 times fine. the $5 billion fine. >> got it. >> but paypal is regarded as being the good libra i've been doing a lot of work on libra. even visa said something positive about libra but this company being down, let it go down today let it go down tomorrow. some people thought, dan, come on they're wrong. they're small thinkers they're exponentials >> they're not they're linear >> they're linear. the people who don't like paypal >> all right an opening bell coming your way and lots more earnings tge o t to

you're watching cnbc "squawk on the street" live from the financial capital of the world the opening bell in 1:40 the busiest day of earnings season before we move on to movers, though, pay attention to durables 2% beats the 0.7 estimate. >> i wonder when boeing -- if boeing takes the max out of production, we should really go

xtrans i think the reverberation of boeing not making the max, you're going to feel that all over the country >> i had no idea as large as it was cited. 0.6 off gdp, a government shutdown of some long duration >> let's not asterisk one of the greatest manufacturers in our country shutting down a big product line i think it's a really bad way to look at it it's like gap versus nongap. that whole set of statistics is going to get driven down we really got to follow boeing even more than we do >> of course then mullenberg yesterday saying, should our estimate of the anticipated return to service change, we might need to consider possible further rate reductions or other options, including a temporary shutdown of max production >> that's going to hurt the gdp. just the way it is safety first >> boeing is going to hurt the dow once again today that's one reason the dow is the only of the major three indices

not to hit a record high let's get the opening bell here and the s&p 500. the big board, a solar energy storage provider celebrating an ipo. at the nasdaq, another ipo livongo health we'll talk to the executive chairman on "squawk alley. >> that's a very good company. could save a lot of money for the system that's going to be a very good interview. there were two health care companies today that sound excellent that are ones worth following. they're not beyond meats nothing is beyond meat >> beyond meat, that deal with dunkin'. also, twice the market cap of dunkin'. >> of dunkin' now, yeah. >> because that's a nonlinear company, beyond meat >> it's exponential. and it's beyond. when you're beyond, you're obviously exponential. >> you don't know what's coming.

>> beyond bacon. >> they're talking bacon now >> when it's made by a chef, i'm telling you -- it's not the same it's different in a lot of ways, it's better. >> what substrait slurry are they going to come up with for that >> peas. david just slags this thing. this thing is an ethos it isn't just a product. >> you would buy the stock here? >> well, it's a little high. but people who are mindful, people who are in the now are buying this. >> clearly >> it's a mindful stock. >> i mean, to carl's point, it's a $12.5 billion -- >> i don't care. the stuff they have in the pipeline -- and the other companies coming in, they don't have the dna by the way, let's understand each other a person who buys a beyond meat burger, i would say point-blank is anti-gmos the impossible burger is gmo let's give it to ethan brown,

who's an evangelist. he's not just a guy running it he's an evangelist he's an evangelist for new kinds of meat. >> apparently you're praying in his church >> i am. it's the church of what's happening now. >> interesting >> do you know how many athletes he's got athletes own a lot of stock. the athletes are behind beyond meat many athletes. >> you know what's all around 206, 208 is beyond, facebook, and apple. all around that level. some stories about apple suppliers preparing to make as many as 75 million iphones and that supply chains are stabilizing here. >> oh, my god. tony has been a skeptic about that >> he covers one-third the ocean as the rest, but yes >> the ocean is filled with plastic. was that an illusion to dow?

>> the ocean covers two-thirds of the earth gary, whatever his name. >> well, tony has been a skeptic. he may be on the run he's saying service revenue is going to be 12%. tony is out there. he's staked his career on an apple service shortfall. >> he's largely of the school of thought that a lot of tech is expensive. he did a note about that, what, two weeks ago. >> yes by the way, remember when morgan stanley put their money where their mouth is i'm interesting to see what like a dollar bill tastes i know what money smells like. they made a flavor for me. it's the smell of money. i wear it on saturdays when i'm in the hamptons. i'm going to send him a taste of

money. that guy wants money where his mouth is, i'm going to get the flavor of money. let's see how he eats it >> speaking of chemicals, how is dow looking to you >> suboptimal. >> yeah. gap eps, ten cents operating eps, 86. operating, 1.1 billion >> not as good as it should be >> that's obviously earnings before interest and taxes. it's been a tough stock after the split. >> every single line item was down that's incredible. you know what dow feels like to any? the really old dow can we just admit that the dow dupont merger may not have been the greatest idea? >> it certainly felt like it at the time

get together, get the ag businesses together, create three champions, split them all off. >> they're 0-3, wow. and it's also like every part of china is there they represent the -- i may give jay powell, because obviously i'm his buddy, the dow and the caterpillar releases and say, i think you need to cut 100 basis points >> and you'll give him the microsoft. >> don't you dare. >> hide chipotle, hide snap, hide utx, hide coke. >> yeah, you're right. >> hide kimberly clark >> i'm going to give him hershey. >> they had a really good quarter. >> doesn't matter. nothing they could do to equalize the hype in that stock. nothing, nothing what else should we give them? >> down 3.5% >> i am going to present a list tonight of what i think he

should look at >> and what he should not look at >> we got to hope 3m talks about ground water, knocks that baby down that's contrary right now to my thesis >> jim, we had a decent premarket there out of draghi, but dow and boeing are going to pull down the blue chips >> well, dow -- jim was just dealt a not great hand he's doing his absolute best and it isn't about single-use bags and plastic >> it's not? >> no, it's not. >> what is it about? >> autos >> yeah. >> electronics >> so it's about end use >> texas instruments yesterday, every line was bad it just wasn't as bad as people thought. in dow, every line was bad, but it's kind of like what they thought. and cat, almost every line was bad, but holy cow was it really bad. and maybe there's not a lot of hope there's a downgrade brian jordan is the ceo of first

horizon. tennessee -- you have to go state by state i know it's not the state we voted that's best for business, but that state is just doing great. he correctly foreshadowed -- last year in october, he told me powell was wrong, things were slowing. i don't know i got to talk to him the industrial economy here is too auto related and autos are terrible >> well, that's why the german efo index is in free fall, according to the efo institute lowest since 2013. if your economy is reliant on manufacturing, forget it >> absolutely. and i think that, you know, a quarter point could help maybe sell some cars, but cars are going to be minus four cars are huge. they're going to be minus four >> they are an important component of the economy no doubt >> ford went from being a red-hot stock to being a show-me stock. other than the f-150, they did

terrible south america, china we listen to dow, china -- look, i know they're waiting they think they're hoping for president warren or something like that. i got bad news for china their 15,000-year plan how about their 15-minute plan the line items in china are so bad. they are china cannot stimulate to save their lives. >> there's also this -- i mean, it's a ways out there. we don't talk about it as much anymore. autonomous vehicles, what it will mean when they do eventually come for overall demand for autos if you are putting together a ten-year discounted cash flow model, maybe you have to start to think about those out years that demand comes down dramatically because you have fleets of these vehicles it's not necessarily a long-term picture where you see a return to growth. >> uber, which by the way, huffington leaving the board today as we saw. >> i think that tony westwood is a whole new board there.

the general council. facebook now down. isn't that telling this day may not be a great day. >> talk about the parent company, talk about the home team comcast is a $200 billion plus market company not moving much on earnings today. you know, people always like to look, how many high-speed internet customers did you add 182,000. how many residential video customers did you lose, 209,000. how many customer relationships did you add overall, 152,000 not bad. free cash flow is strong we're doing okay at the cable networks up 2.5%. >> yeah, i thought fine. we need to know more about sky >> a lot of things were adjusted sky is obviously being incorporated now you can see this is a stock that has moved up dramatically over the last few months. >> you know what's getting hit pretty bad here? southwest air. we've got to address this. southwest air is an unbelievably good operator.

down three earlier it's falling sharply the airline is pulling the boeing -- here we go pulling the boeing 737 max until next year. what a transparent man this. subpoena joining us exclusively, southwest chairman and ceo gary kelly. thank you so much for always being straight forward and coming on, on the tough days the first thing i saw, because i use the newark airport all the time, you're pulling out of newark is this something related to real issues involving time to pull in your horns is this metaphorically important? or what we're really talking about is, don't worry, we're going to come back, the max will triumph, and that's just an asterisk i read it as being, wow, maybe southwest is in retreat. >> hey, jim. good morning this is a good day so we're managing our way through the max. i think as an overarching theme,

i want to make sure you all and your viewers understand that we have one issue, and it's the max. so no, we're not in retreat. the fact that boeing found another issue extended the max grounding for the rest of the year and so we're just in a situation where we need to tactically manage through that. newark, just to cut to the bottom line on that, is very straight forward we've consolidated our flying in ohio to a couple of airports we consolidated flying into detroit by closing flint last year we serve one airport in chicago, one in dallas, one in houston. new york is a destination market for us we don't have a large presence we face very large competitors between jfk, laguardia, and newark so this is simply a recognition that newark is underperforming, and there's an opportunity to

improve our new york performance by consolidating the operation into laguardia we'll use those airports to focus on expanding in the interim here while we're not able to fly the max into hawaii, where we're having great success. so we're simply redeploying resources here temporarily we have great success in large markets by focusing on one airport. we'll have more seats in laguardia and we'll serve our customers well there the other thing that i wanted to make sure that you all were clear on is that our cost outlook is really unchanged for the third and fourth quarter, for the year, except for the effect of the max. so i feel really good about the cost work that's under way of course, we're incurring a huge penalty from the max being grounded the same applies to the revenue. our revenue outlook for the third quarter is very consistent

with what we saw in the second quarter and is only impacted by year-over-year comps we just had easier comps in the second quarter >> gary, let's just go right to it from my perspective, boeing has not handled this situation well. it seems like every day there's something new. i don't like when there's new revelations. what's it like to speak to them? who are you speaking to? are you speaking to the cfo, greg smith are you speaking to mullenberg do they have it under control in any way at all, do you think because i've got to tell you, they are always about safety, but gary, if you had to botch it, i think that they figured out how to do it you tell me what's really going on behind the scenes >> well, yeah, we're talking to everybody that you would expect us to be talking to, jim certainly we're talking with dennis we talk with kevin mcalester, the ceo over boeing commercial boeing is a great company.

they're an important company for our country. obviously we are an all-boeing customer it's my desire that we continue to do that so we're working our way through this problem if you go back to march with the grounding, we were anticipating that this would be very temporary. we'd be back up and flying in a couple months. now it's extended obviously to the entire year. i'm assuming you all understand our schedule here with the max it's really straight forward i thought seth captured it very well early this morning. but if boeing isn't going to have the software ready until september 30th, that's going to take the aa some time to revie that and then unground the airplane then we've got one to two months worth of work to get the airplane flying again. so we're focused on that it's a great airplane. it drives superior economics safety is not negotiable

if we deemed it unsafe, we wouldn't even be having these discussions. but yeah, we're unhappy that it's taken so long, and we're in the dark, just like you are, on a number of technical matters. our pilots are heavily engaged and working with boeing to understand the changes in terms of the software and the impact on flight control systems and things of that nature and are very comfortable with the track that we're on. we just need this all to get done and get the airplane back in the air >> meanwhile, gary, your capacity guidance has gone from plus five to minus one to two. what are you going to demand from beauing to ma from boeing to make good on this >> well, boeing has already come forward and said they've set aside, you know, $4.9 billion. we're their largest customer we're the largest 737 operator in the world we're obviously going to do what

we think is right for our company and our shareholders i'm not going to obviously negotiate here in public on that, but it's not a good situation. we're not happy about it you saw here in the second quarter it cost us $175 million. and that will be more in the third quarter. one thing i assume you all know, we were anticipating getting 41 more deliveries of the max this year, and so our exposure with our route system grows again, that's why we decided to make the change with newark because there are needs that we have in our route system where we need to add flights, and we're just not in a situation right now where we can afford to have flights that are not as productive so the good news is our route system is really healthy the demand for travel is really strong our competitors are benefitting

here, you know, in the meantime, which i certainly don't like but it's all short lived this too shall pass. i'm hoping we'll have a nice clean 2020 where we can get back on track >> yeah, to that point, though, you said moments ago, gary, that you're in the dark on a number of the technical matters that boeing is dealing with would it be your hope they can be more transparent, or is it your expectation that in the weeks and months ahead, you're going to continue to be in the dark on some of these things >> well, alli meant was, you know, the issue that was discovered last month that's created this delay now until at least september, we had no awareness of so i just don't know what else there is an airplane is a complicated machine, you know. so i wouldn't expect that we're going to know 100% of what is involved there but assuming that we know everything that we need to know, we've got a plan, we've got a path, we'll be growing next year, and i would hope that by the middle of 2020 that we're

more or less back in line with our fleet plan you know, as i've looked at all of our markets as an example here and their performance in the second quarter, we have very high low factors we've trimmed back flights to deal with a 7% cut in our capacity in the second quarter everywhere i go, our markets are telling me, gary, we need more flights. our flights are down from a year ago. our customers aren't happy our employees aren't as productive so we're muddling through. again, i'll point out -- and i know you all know, but our earnings per share, even in this environment, were up 8.7%. so it is worthy of note that our employees have done a phenomenal job, you know, muddling through this mess. again, we'll get through it. we'll be healthy and we'll be ready for 2020 everybody should look out. >> gary, what happens if your

competition, which doesn't have as many of max, says, you know what, we're going to keep the maxes out? we question their safety why would anyone fly a southwest max if, say, an american max was grounded >> well, that's pure speculation. i don't want to speculate. there's no hint that that is going to happen. regardless, jim, we've got work to do to convince our people and our customers that it is wise for us to continue to operate the max. we know that, and we're up to the task all the research we do shows that southwest enjoys a very strong brand ranking and a very strong customer loyalty and following. there's a trust there. and i can assure you we're not going to do anything to lose

that trust but nonetheless, yeah, we're going to have to have a lot of communication. our pilots will play a key role in articulating why why it is se to fly the max and i don't think safety is an issue here, but we're going to have to convince all of our customers of that and we'll be up a to that task as well. >> one last thing, gary, before we talked to you we mentioned muilenburg's comment yesterday raising the possibility of shutting down the line just your response to that >> well, i haven't talked to boeing about that. i have read some of the media reaction to it i think it's an overreaction so i'll violate my rule here and speculate a little bit, again because i haven't talked to them, but i think it's just being pragmatic and saying if you just look at our situation, we've got 34 maxes that we're

responsible for. we had to find place to park them they are in victorville, california there is an ongoing maintenance of those aircraft as required. so now that boeing has gone from sort of a 90-day out of service to something that's more like nine months, and they are continuing to produce airplanes, they are piling up and they have to find places to put them, then we have a complication so again they are going to owe us 41 airplanes by the end of the year it's complicated to see how they are going to put those airplanes through the certification process and get them delivered to us. so you can only pile up this, you know, inventory of airplanes so much. i think that's what they're saying and i am empathic to that because it is complicated and we know it because we're involved with that.

so dwrong they ai don't think tn they are going to discontinue the max. the max is a huge part of boeing's future, and it's a great airplane there is no reason to think that way. in any event, we want our airplanes just as fast as we can get them, and we want boeing to keep that production line open. >> all right gary kelly, thank you as always for your candor. gary kelly of southwest air. >> thank you. >> as we go to break, the movement in treasuries we got some action on the ten-year yield dow's down 121 we are back to 3,006 don't go anywhere.

dto experiencer gthrilling performance. now, at the lexus golden opportunity sales event. get 0.9% apr for 60 months on all 2019 models. experience amazing at your lexus dealer.

i have those notes i'm fired up to be here today. it's pretty cool pretty damn cool

woo! >> one of the great hype men of all time, steve ballmer welcoming them to the clippers the joke was yesterday that he saw the microsoft close. that's why he was so fired up. >> he was a great friend of mine in college he was the business manager when i was president at crimson he is no different now from when he was then. a delightful guy, actually. >> love it. a big show tonight we have a line if you see that, that's the biggest loser. the selfie generation, kind of shocking they make braces. >> i know. >> how the economy is doing. richard fain, some of these cruise ship stocks have been horrendous others good. millennials, gen-x, do they take cruises? >> gen-x is doing snap all the time do they have time to do anything else just snap. what an ugly day here really. >> why >> because the industrial

economy is not that good >> that's a little messy, but hanging on to 3k the markets down 132 almost 15 on the s&p aomt.k on the street" continues in men

♪

good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and david faber at post 9 at the new york stock exchange hanging on to s&p 3,000, five points to spare. dow is weak as we get some earnings from some cyclicals and industrials, which are not so good. >> our roadmap starts with the biggest day of earnings so far tesla, facebook, 3m moving in on results. what's behind the numbers. >> the ceo of the world's largest spirits company. >> and later we will speak to a former tesla board number on those weak numbers from the automaker and where things go from here. >> stocks sliding. the ecbs mario draghi signaling futures ahead.

down 140 points on the dow the busiest day of earnings season so far. tesla shares are down double digits after posting a wider than expected loss on dispointing revenues on the opposite side, 3m leading the dow reiterating it's outlook for 2019 and facebook, better than expected results after getting hit with that record ftc fine, but warning a growth slowdown is ahead. guys, interesting the agree to which stocks are moving on the print. i mean, you are getting routine 5 to 10% moves in some of these names. >> i went into 3m to see if there are any signs of improvement in the outlook that's an industrial bellwether. i think shares were hit so hard coming into the print. sales were still down 2.6% it was still mediocre growth organic sales down 3.9%. the only category that actually saw growth was health care seas consumer down.

automotive, electronics a headwind if you are looking for a reason to celebrate in terms of what it's going to mean for the global economy, didn't necessarily get any robust growth in the 3m number. >> facebook down a bit strong results. >> very strong growth rate strong 2.1 billion people using one of their services every single day on this planet conceivably no real losses in terms of their customer base or user base, i should say, and their customers and/or clients, those who are advertising. at the same time we are seeing a little bit of weakness following up yesterday, of course. people still looking at and trying to understand the ramifications of the settlement with the ftc and how stringent that word provision is going to end up being for mr. zuckerberg, who obviously controls 60% of the votes at the company and whether it really is going to

have an impact in terms of their policies he's embraced it on the call, he has embraced it overall saying we want this, bring it on, it's going to help be better. >> the question is how it's one thing to have compliance does it actually do anything to change the practices of how they gather data and what they do with your data what does it mean for the engineers? what does that increased spending going towards >> right 31% increase in the head count at the company ovyear over year >> first acceleration in revenue in three years if they can get back to 218, the new record high, it's really not that far away from there right now. >> a nice run up into earnings a closer look at one of the other big movers of the day. tesla. colin rush with us an out perform reading on the stock. $350 price target. you might be in the minority today, colin there are complaints, everything from the bigger miss, margin miss, the departure of a

co-founder not inspiring a ton of confidence. what's your read >> a couple of things that we were incrementally cautious on one, the model pricing was worse than we expected, which was driving some of the gross margin miss we were encouraged by the cash flow metric, $600 million free cash flow generated in the quarter. and the improved on the model 3. all in, we are looking at this company as disrupting the auto industry and having an opportunity to have outside incremental margins and earnings power here we are seeing the weak auto market impacting tesla as well, especially on the high-end products >> explain what's happening with that automotive margin that was the key going in. it was a big miss. it's raising all sorts of questions though about whether they can do this profitably. >> yeah, i think there is a couple of key things we want to focus on one, they really adjusted their pricing pretty actively over the last six months on the model s

and clearly are driving additional volume in lower price regions. they are also insisting on not refreshing the model, which doesn't make sense from a strategic standpoint it's been a great success and seems due for a refresh. they are trying to extend the range on the vehicle that to us is a mistake. the model 3 is really the heart of the company going forward in that platform. so to see them improving on that, and the march gin is a positive they made major mistakes in terms of setting up the fremont facility they are running into the upper end of what they can do there. they are expanding capacity to roll out the model y in china they can see some benefit. i think the configuration of the model 3 factory was a major mistake that's continuing to be a problem at this point. >> colin, they have cut some workers. they have eliminated the cheap models of the s and the x.

they have cut their capex target now for the year how many other arrows are in their quiver >> for us they still have the regulatory credits we don't think they monetize that as much as they might have. they are continuing to move a lot of vehicles. 95,000 cars they delivered here. really the big number for us as we go into the back half is how many can they produce to get to that guidance for the full year, especially as they die veers fy their focus an ramp a couple new facilities here. that's a number we will be looking at keenly as they start to really try to get investors to focus on the second half of 2020 from a margin and cash flow perspective. >> why are they -- so they are cutting capex and r&d. some say that's not what they should be doing as a growth company and that's worrisome. >> they are spending a lot of money on r&d the capex is a questionable number in terms of where they are investing. they have done a nice job in terms of being capital

investments. the r&d they have a lot of money going into different programs. that will fluctuate in terms of different ramps. i think they are doing the right thing in terms of optimizing the capex and working with them to drive that down. the real question is can they make these vehicles quickly and efficiently. then the big cost driver is the battery cost we have seen them be ahead of the competition in terms of battery technology they need to continue to drive that down thrower the cost and lower the weight in an extended rage that's the key driver for us we think they have an awful lot of gas in the tank there. >> not worried about the executive departures >> it's an ongoing issue the departure was rumored for several quarters they have seen turnover on the management side the last year and a half that's continuing to be a concern for us they have talked about that not being an issue, but clearly if

you have that sort of turnover you have adjustment in layup styles and focus that will continue to plague them, i think, the next couple of years. >> stock down 14.5%. thanks for joining us. in defense of tesla, come on rusch. >> facebook down the ftc fine, the regulatory headwinds weighing on the stock. joining us on that is rbc capital markets lead analyst mark mahany and sebastian. good to see you. mark, net-net, after the ftc news and the print, what's your take >> incrementally more bullish. this was an accelerating revenue growth story it was the first quarter since 2015 where they ad revenue growth accelerate. they are growing two times faster than overall internet advertising. this company is generating very high margins, even in a deep investment year. it's one of the best business model and valuation is

attractive at approximately 19, 20 times gap earnings. it's probably the best buy long-term, 12 months out in the internet space. >> we didn't get to check in with you yesterday on the ftc settlement does that privacy committee, is it going to crimp growth or innovation at all? >> we don't think so it's possible. the company went out of its way as it did last quarter to warn about targeting headwinds in the back half of the year, their inability to target in the way that they have in the past, maybe lowering the roi for advertisers and reducing advertiser interest in facebook. it's possible. i don't think that's going to happen our survey consistently shows that the two top rohingroi plat google and facebook. the third is instagram i think advertisers appreciate the scale, the targeting of facebook's platform. i don't think these privacy regulations are going to change that i think the value proposition for advertisers is compelling, has been, and will remain.

>> colin, that is certainly backed up anecdotally from some of the cmos who spoke out in the past couple of weeks now we are heading into the thick of an election season the next several quarters. i wonder whether or not you think that incrementally is going to push revenue excel r acceleration even farther? >> i think clearly, as mark said, the trends for facebook are very good and it was an impressive quarter, not just in instagram but the core facebook app as well. the elections overall for paib a facebook are not going to be a big deal they are pivoting towards not just privacy, but commerce and payments from that perspective, the holiday season, the shopping season whie think will be more important than the election skm. cycle. >> i mean, mark, you really feel comfortable telling investors to buy a company that is under siege by regulators from the fdc to the dodgj? it goes from reviews,

investigations, anti-trust, its privacy. i get that the shares have been strong and the results speak for themselves, but is this going to be an overhang for the stock >> are we talking about facebook, google, or amazon? >> let's start with facebook facebook is -- they are the only one who disclosed they are spending billions on this. that could be a risk in itself. >> yes, it could be. these are unchartered waters no, i don't have great conviction that what investors are going to do with this kind of risk. the peak multiple facebook enjoyed in the past, 25 times earnings, may not get there again. there may well be a market discount of one or two turns on that, try to cap dhur tture the regulatory risk. at the end of the day i think what's going to drive the stock -- by the way, there has been enormous amount of negative publicity on facebook the last 12 months. if there was public enemy number one, at times it was facebook. look at the fundamentals they are extremely consistent.

users aren't budging from facebook and the family of properties and advertisers aren't either. it's possible the regulators will change that i think it's highly unlikely that there is a breakup of facebook, that they are required to sell whatsapp or instagram. i think that would be completely unprecedented. yes, there is risk it hasn't shown up tin the earnings. >> i wonder how you sort of process sara's question, especially given the potential scope of what justice could eventually do and how little we know right now >> well, quite frankly, i mean, to some extent we welcome the regulation or certainly oversight. user trust is what is most important for facebook, and clearly their management team, at least they are saying that they are embracing that as well. what i worry more about is the fact that facebook, as a significant technology enterprise, could be a little bit distracted as they pivot

towards privacy policy and oversight. where their strength lies in product innovation, engineering. as the cfo indicated last night, they are going to perhaps see some headwinds on the revenue and margin side. we think that's probably another case of the boy crying wolf. but we'll have to wait and see as facebook does start to begin investing in these other areas. >> finally, mark, the treasury secretary was on our air yesterday, referenced amazon and retail and made some headlines take a listen to this. >> if you look at amazon, although they are d there are certain benefits it, they have destroyed the retail industry across the united states there is no question they have limited competition. there is areas where they have really hurt small businesses >> i just wonder, mark, what you make of that, and to the degree to which that's going to boost amazon going into the holidays >> well, let's see i think what the secretary is

referring to is the internet i think the internet is fundamentally undermining main street retail. i think the response is that is what consumers have clearly wanted they have clearly found the efficiencies of shopping on the internet, the price comparison, the ability to shop anytime you want to, pretty much get anything you want. by the way, better prices for consumers. so highly competitive, efficient offline retailers like walmart have pivoted well and succeed in this environment those that were poorly run companies like sears fall back so i think that's really the answer, which is that you have had a very good innovator come into the space and it's been fundamentally good for consumers and bad for poor-performing retailers. >> the only thing i would add to this is that mr. mnuchin was a board member of sears. >> i heard that. >> interesting you mentioned that company, mark.

>> though he doesn't have anti-trust shor anti-trust authority, right? he talks to president trump a lot as an advisor. >> guys, thanks. good to see you, mark and colin. >> thank you. when we return we'll hear from the ceo of the world's largest spirits company deagio and their quarter and the dow is lower by 100 points right now. mario draghi signaling a rate cut and easing straight ahead. we have seen a bit of a reversal in europe. we will discuss it when "squawk on the street" comes back. (soft music)

- when i see obstacles, i create opportunities. - when i see adversity, i find a way. - when i hear never, i say now. - [announcer] southern new hampshire university is education made to fit your goals with over 200 degree programs, flexible class schedules, and some of the lowest online tuition rates in the nation. (cheering) - so when i face barriers, i can break through. - [announcer] breakthrough at snhu.edu.

mno kidding.rd. but moving your internet and tv? that's easy. easy?! easy? easy. because now xfinity lets you transfer your service online in just about a minute with a few simple steps. really? really. that was easy. yup. plus, with two-hour appointment windows, it's all on your schedule. awesome. now all you have to do is move...that thing. [ sigh ] introducing an easier way to move with xfinity.

it's just another way we're working to make your life simple, easy, awesome. go to xfinity.com/moving to get started. time now for our etf spotlight. mike santelli is here. he is going to look at the recent rotation towards cyclical and riskier stocks away from the defensive names and things we think of as more stable. >> exactly this rotation almost everybody we talk to here thinks can and should happen, and we have seen evidence in the last several weeks. look at a couple of charts one-year basis of some -- two of these stable defensive quality type etfs. that would be the spl as well as qual, which is msci quality factors. essentially big stable companies. they have been the steadiest performers on a one-year basis that white line is the semiconductor index. and that has gone almost vertical recently until today.

then down below sphb, that is a basket of more aggressive and faster moving stocks now look at the same four on a one-month basis and you can see the recent acceleration of the more aggressive. there is that semiconductors getting very overbought out, 15% in a one-month basis high beta up 5.5% leaving the others behind. the others are still participating. i think that has been the perfect combination lately because until today, big cap tech, the core of that big quality growth trade, has worked in almost either type of market. i didn't mention the banks they are also in there so the question is, has the aggressive stuff gotten overheated in the short term so this rotation maybe takes a break or is it going to continue there is room in terms of valuation and positions for that to continue. >> yields have to be a part of the story? >> completely. >> we went all the way down and then we have stabilized around the 2% -

>> that's why, in way, the yield sector, the low volatility stuff has hung in there. they do have the yield support on a relative basis. >> the tape has some stories about open interest in vix 20 calls for august does that ring true to you, that people want protection the next month? >> people have that muscle memory in there because this is feeling a little bit like last summer where you kind of ratchet up to new highs. volatility is drained away the vix around 12 yesterday. make that bet a little bit cheaper. >> doesn't mean we hit 20. i see why people are playing for it. >> yeah. thanks. when we come back we are going to talk to the ceo of spirits giant diageo as we get a check on the markets here. boeing is dragging 100 points off the dow. the index itself is down about 80 and you see nova opened down 7%. back in a moment if the medium term inflation outlook continues to fall short

of our aim, the governing council is determined to act in line with its commitment to symmetry in the inflation. is where people first gathered to form the stock exchangeee, which brought people together to invest in all the things that move us forward. every day, invesco combines ideas with technology, data with inspiration, investors with solutions. because the possibilities of life and investing are greater when we come together. ♪

world's largest spirits maker diageo reporting higher annual profit this morning operating profits rising almost 10% and the company returning more cash to shareholders in terms of buy-backs i spoke this morning with the ceo ivan menezes about the company's strong earnings report here's what he said. >> the results were excellent. we grew sales of 6.1%, profits 9%, eps over 10% within that we increased investment in marketing ahead of sales. we delivered strong cash flow and to me the most exciting thing is quality of results. we had growth broad based around the world every region in

growth, north america growing 5%, europe 4%, latin america and asia 9%, africa 7% our categories are doing really well. >> how about that gin number 22% increase in sales for gin. what's driving the appetite for this >> you know, this trend started in spain about eight years ago the trend came to the u.k. it spread across europe. now we're seeing brands in brazil and mexico and south africa and australia the top end of gin is growing really fast. hasn't quite happened in america yet. but we're working on it. and i do think it will develop in the u.s. as well. >> we're tracking the tensions between the u.s. and china on trade. what are you actually seeing from consumers >> actually, our business in china, mainland china, continues

to be very strong. we have two broad businesses there. one which is growing north of 20%, and a scotch whiskey business with the high end of scotch also growing double digits so we see the momentum continuing as china pivots to a consumption-led economy. >> american whiskey has been the target of retaliatory tariffs from everyone, from china, eu, canada, mexico at this point how disruptive are the tariffs to your industry >> we obviously don't like tariffs. ours is an industry that's truly global in terms of our products moving around the world, and to operate on a free and predictable and fair trading system is hugely important to the spirits industry. >> brexit. i know that we've talked about it before, and you are

relatively insulated you benefit from the weaker currency, the supply chains i think are relatively local in scotland and places like that. how has the calculus changed now that you have a brexiteer as a british prime minister >> well, it's day one for the new prime minister here. what i would say from a diageo standpoint is we are prepared for all of the scenarios that might emerge we clearly want a deal, and a deal to be sensible to get struck quickly however, our business is more resilient in the scenario. whatever happens in the world, we will be making scotch whiskey in scotland. we are not as impacted as some other sectors, so we can take brexit in stride >> they are actually one of few beneficiaries that benefit from the weaker currency and tariff-free trading.

other tidbits out of this report whiskey did really well, growing 6% they have had this amazing release of the "game of thrones" inspired sort of campaign. white walker, johnny walker. my personal favorite, the lannister one. he said clearly that can't continue now that the show is over between that, the 22% gin growth. >> that's interesting. >> who knew? he expects d it to come to nort america. >> i don't know what that means, it to come here. >> the crazy, you know gin drinking at night. >> isn't that when people mostly drink gin? it's not like it's new. >> it's not popular like it is there. north america versus the world trend, beer consumption is growing around the world we talked about it in guinness north america not so much. we are still in the spirits zone at least in my house. >> yeah.

no bud's beer volume up two and pricing of four is pretty impressive. >> unexpected given the recent trends, yeah. >> yeah. so the fact that they have had difficulty with the asian ipo listing and the debt, i mean, some relief there certainly. >> good stuff. let's get to sue herera and get a news update at this hour. >> good morning. here's what's happening at this hour puerto rico's governor ririchar announcing he will resign on august 2nd this after two weeks of furious protests touched off by a leak of insulting chat messages between him and top advisors protesters outside the governor's mansion erupted into cheers after the announcement. southwest airlines is pulling out of new jersey's newark liberty international airport following extensive delays caused by the faa's grounding of the boeing 737 max. it will cease operations

november 3rd. >> we face competitors between jfk, laguardia and newark. they are underperforming and there is an opportunity to improve our new york performance by consolidating the operation into laguardia >> a second european heat wave this summer setting a new record of 105 degrees in paris, beating the old record set back in 1947. parisians, as you can see, flocking to the fountains in front of the eiffel tower to find a little bit of relief. you are up to date that's the news update this hour guys, i will send it back downtown to you. >> okay. thank you, sue. when we come back right here we are going to hear from former tesla board member steve wesley. we will get his take on today's big drop in the stock price. more "squawk on the street" when we come back (in dutch) tell him we need this merger. (in dutch)

it's happening..! just ok is not ok. especially when it comes to your network. at&t is america's best wireless network according to america's biggest test. now with 5g evolution. the first step to 5g. more for your thing. that's our thing.

the european central bank painting a dire picture of growth in europe today signaling more easing on the way euro weakening, reversing, stocks selling off, bond yields going the other way. here to explain what it means for the u.s. as well, senior economics reporter steve liesman. you would think, steve, when draghi says stimulus is necessary, you get a weaker euro and higher stock market. what happened? >> let's talk about why it happened let's talk about what happened the u.s. ten-year yield illustrating the drama across market it starts at 745 the european central bank seemed to check all the right boxes about easing on the way. yields fell. stocks rose. that's what basically the ecb did while some had expected potential action today the consensus look for draghi to set up a september move. that's what they did

later in the press conference draghi seemed to underscore that loose monetary policy is on the way. he said the governing council is determined to act. the ecb stands ready to adjust all instruments as appropriate options include potential new asset purchases. at 8:30 that govish optimism flew out the window. there was a broad reversal stocks fell and the euro strengthened that brings us perhaps to the why. one idea, draghi did not go far enough markets wanted more and they wanted more now. another is that markets were concerned with draghi's pessimistic economic view. >> now incoming signs show weaknesses of weakness of growth in the second and the third quarter as well, so this rebound becomes less likely now. and all in all the balance of risk was assessed to be on the downside. >> whatever the reason, one important impact is that fed funds fuchls markets reduced the chance of a 50 basis points cut

from the federal reserve raising the odds of a 25 basis point cut. that seems about the right call anyway my take on this, i think draghi was plenty dovish. he seems more worried about the economy than he did before the concern may be that the medicine doesn't meet what the problem is >> i think the other takeaway here, steve, is that this sort of helps explain or at least justify why the fed could cut interest rates i mean, you might look at the data and say why would they be cutting rates? all the data has been mostly solid. when you have the most powerful central bank in the world going so far so easy, it becomes a lot more difficult i mean, the currency market -- >> i thought you were going to talk about the market. he doesn't see declines, second and third quarter rebound that they were hoping for i think that's another thing that weighs on the federal reserve here we want to be a little bit careful here, right, because

there may have been marginal folks that had a big bet on the ecb acting today some of that may have to clear and maybe we can put what happened earlier this morning behind us and you have more of a fundamental trade. but it's hard to argue, i think, and i want your take on this, sara, it's not clear that the ecb is going to act in september. and act pretty forcefully. >> i think the other sort of wildcard is, this is draghi's third to last meeting before --? >> yeah. >> this was, yeah. >> so then christine lagarde comes in i wonder if draghi is going to feel like he has to act before she comes in, or if he lays the table for her to act there are sort of all these kinds of mysteries in here the other takeaway is he always stresses the importance of fiscal policy and reform i think she will have a lot easier time doing that as someone who is a politician with easier relationships. >> maybe she will have an easier time getting the european governments to act draghi has been strong about this as long as i have been

covering him he hasn't been all that successful maybe lagarde with her contacts with more of the politicians in europe can have a little more success getting solg some of that fiscal stimulus going in europe. >> which could help growth. >> sure. >> something they desperately need there is only so much central bankers could do. >> he took himself out of running for the imf job. >> i thought that was interesting. it wasn't clear if i said i'm not available right now to take that job or i'm not available in the future to take that job. >> the quote is i don't think so, i'm honored by that but i'm not available so it's not an issue. i am not sure there was a right now in there. >> if you ask me out to dinner and i hsaid, carl, i'm busy tonight, and you say what about next week, and i'm busy all the time no matter when you want to go to dinner i'm busy, carl. >> that's some of the c conversations we have. >> how is never? >> that's what david said with

the ladies. >> it's true steve, thanks. as we go to break, take a look at some of today's big earnings movers 3m leading the dow we are offhe t lows, but we are down 60 points

one top strategist says the fed could be setting up for a painf painful drop find out on tradingnation.cnbc.com more "squawk on the street" coming up. don't miss your golden opportunity

to experience our most advanced safety technology on a full line of vehicles. now, at the lexus golden opportunity sales event. lease the 2019 es 350 for $379 a month, for 36 months, and we'll make your first month's payment. experience amazing. shares of tesla are down sharply this morning after the company reported larger than expected losses yesterday. technology officer also stepping down to a transition role, sort of as an advisor to the company. joining us to discuss, a former tesla board member, steve westy. nice to have you with us a lot of different information from the market to digest, steve. 360,000, 400,000 vehicles continues to be the guidance we are getting.

mr. musk talking about exponential growth rates, the inability of the human behimind understand that. give me your take on the quarter and for the future. >> look, i'm bullish on the company for four reasons and let's look at the numbers. tesla justboro duced record auto deliveries of 936,000 vehicles in q2. that's up 50% from q1. second, losses of $408 million you never like to see that, but the company's got 5.1 billion in the bank so they are financially stable they are on track to complete the third manufacturing facility later this year and begin selling cars in china. they expect to be profitable the last half ofthe year it's hard for me not to like that story. >> clearly, the market doesn't necessarily agree with you there is always concern about the broad reach of his goals and whether or not he is actually going to be able to achieve them what gives you the confidence, for example, that they are going to continue to be able to perform at the level they have

while, frankly speaking, the overall demand for autos worldwide doesn't seem to be particularly strong right now. >> look, the pbig picture is tha the world is moving faster towards electric vehicles than anybody realized and tesla has built the global leading brand second, what most people don't realize is they are building up manufacturing capacity around the world faster than anybody's ever done before they are the leader in electric vehicles they are clearly a leader in economist vehicles and they are on track to be profitable. i think that's not a bad story to bet on. >> steve, you talk like the rest of the industry is standing still and we know that volkswagen and porsha and everybody else is on the move, not to mention domestic manufacturers. how long would you expect them to hold that lead? >> that's the big question what i would observe is this there are a lot of great companies out there. audi is making great cars in the market there is clearly going to be competition.

i think elon hurts himself with sky high expectations. the simple fact is this. they are targeting 25% gross margins. that may be a little ambitious, but they are already at 18.9%. i think they are going to get the gross margins up the industry average is in the mid-20s. that's pretty good but the big picture that most people miss is that the company is successfully built three manufacturing facilities in fremont, california, reno, now in shanghai. they only have one to go in europe when they complete those they are operating expenditures, capital expenditures will go down quite a bit analysts are predicting the company to grow from 24.9 billion this year to 30.2 billion next year it's one of the fastest growing car companies in the world, trading at 2 x revenues. that doesn't look like a bad bet to me. >> steve, we can debate the financial picture of this company all day long there are plenty of people on both sides how about the personality, the

drama that surrounds elon musk, the fact that another key management departure happened, this one a co-founder? what's causing this mass exodus? what's actually going on in the upper management team? why is this a company that can't even get it's earnings release sometime between 4:00 and 5:00 exactly every quarter? questions like that? >> let me fwlaek into two. first, it's a blow for the company to use j.p he is an extraordinary guy he is one of the few people that elon trusted from the beginning. they also lost the cfo he went to apple they have lost some key people tesla so doing a lot of the right things but they need to stabilize the senior management team there is no doubt about it i think the big picture here is that elon has built a unique brand. people want these cars technologically, they are ahead of the market.

i'm sure mr. musk is lashing the team i'm not sure i'd want to work there. the fact is that he is moving faster than anybody else in the auto space steve jobs wasn't easy to work for either but you didn't want to bet against him. >> mr. musk with his different ventures out there, certainly pushing the boundaries for example, his expectation that teslas are going to become fleets of autonomous cars fairly soon, owners will be able to make money from, is that something that you really believe is a serious possibility, steve so >> i think it is a serious possibility. when that happens, who knows what i will say is tesla is one of six or seven leaders in the autonomous vehicle space whoever gets there first is going to be sitting on top of one of the biggest companies in the world. but there is a progression from

internal combustion vehicles people thought we would be on that for another many decades. that's not the case. the world is going electric. tesla created the leading brand in the space the next challenge is who pulls autonomous technology first. tesla is clearly in the top two or three he may overpromise, but he is beating an awful lot of people to the punch. >> because you were a former board member, there ahave been changes at the board level, shake-ups. how would you describe the governor nens of this company right now and the loyalty the board has to elon? >> look, there is far more drama than i'd like. you want to see more stability at the top executive team. they brought in a new chairman, independent chairman of the board. the board is making many right steps. elon is a visionary. he is not easy to manage, but that comes with the territory. >> steve, appreciate your taking time with us thank you. >> happy to be here. thank you.

>> steve westy, former tesla board member. over to john ford with a look at what's up next for "squawk alley." >> good morning. well, health tech ipos are back. going public here at the nyse today. and that is focused on treating chronic diseases like diabetes we'll dig into that ara, senee what might be coming up next that's coming up next on "squawk alley. ♪ as your life grows, so do your needs. ♪ and with bank of america and merrill, the benefits you get can grow, too. as a preferred rewards member, you can enjoy priority service and exclusive discounts... so your growing life can be more rewarding, too.

♪ what would you like the power to do? ♪ - [student] my degree from snhu has helped me tremendously. (lively music) the flexible class schedules allow me to run my catering business and be a mom and parent. breakthrough at snhu.edu.

♪ it's been a rough season for hampton's real estate, suffering one of the worst summers in a decade our own robert frost joins us on set. do we have some new numbers on how bad it's becoming? >> those poor people in the hamptons, let's shed a tear for them sales falling in the hamptons for a year and a half straight prices down 2.5% compared with the same quarter a year ago. that's according to a new report the hamptons under the same pressures as a lot of other high-end housing markets right now. you have an over-supply of luxury homes, unrealistic asking prices, a lack of foreign buyers

and that new tax low that is hitting high-tax states. the number of homes for sale in the hamptons jumped by 84% in the quarter and there is now a three-year supply of luxury listings the biggest homes, check these out, are seeing the biggest price cuts dick cabot's house in montauk now listed for a mere $34 million. that's down from $62 million when it was first listed to $28 million off the original price. it's on 20 acres, known as cabot's cove it's on the water. and a megahome in bridgehampton called the sand castle, that gets a $10 million price cut, now at $40 million it's 17,000 square feet with 11 1/2 acres, a baseball field, bowling alley, spa the home will host the president next month for a fund-raiser held by its owner, joe ferrell now, beyonce and jay-z rented it for a month back in 2012 for $400,000 it's since gone to $1 million a month. but clearly, it's not going to

be rented in august, since the president is going to be there >> is that the builder ferrell, the same guy who builds all of these houses >> exactly, exactly. this is a spec home. and like a lot of these homes, like dick cabot's place, it's been on the market for a long time, and that's the issue you have a standoff where sellers don't want to come down and buyers aren't buying >> and how about the decline in say, chinese buyers or latin american buyers. is that a big piece of it? >> that is a piece of it, be the hamptons was a wall street dependent market it's the first time that anyone can remember that stocks are doing so well and the hamptons are down it's sort of a mystery but what's replacing wall street are a lot of the tech entrepreneurs are taking a little money off the table a lot of media people. so it's become more of a mixed bag. but still, wall street, hollywood, the actors are still the basis of that market >> is it correlated with the at the tent real estate, which you have covered over and over >> absolutely. it's correlated with manhattan

and the whole high end is suffering. there's just too many too expensive homes on the market. and the sellers have a lot of money, so they don't need to sell the buyers are discretionary, so it's the standoff. >> any sense as to what resolves that kind of a standoff when you finally see a new price point, sort of establish the norm and then move forward from there >> it's going to be time and everyone thought that a year and a half after salt, that sellers would finally say, it's just going to get worse. let's just let go of it, and they haven't sp, so it's going o be years and years before all of this stuff clears. now there's a three-year supply of these high-end homes. so it's going to take a while. >> robert, we'll watch it. thanks a fascinating piece of the real estate picture >> is going to make a bid for that montauk piece >> my days there are over. >> but legendary >> just starting with a nice -- with a cool $34 million. >> yeah, growing family, this is the time to get in on montauk. it's going to be hot

>> always wanted to be near the beach. meantime, southwest paring its losses the airline pulling the 737 max 8 until next year and warning about higher than expected cost. they have more max airplanes than any other carrier and we talked to gary kelly in the last hour >> our flights are down from a year ago, our customers aren't happy, our employees aren't as productive so, we're muddling through it is worthy of note that our employees have done a phenomenal job, you know, muddling through this mess. southwest also saying it's leaving newark airport, consolidating new york operations to laguardia as they try to find some more cost efficiencies as a result of the max trouble. he came to play today. >> he did. he was very straight forward, more or less, in terms of discussing it. obviously saying, this is it this is our only issue, but of course, it's an enormous issue for them but jim asked a very good question, to which he did not have an answer, which is, what

if some of your competitors who are not nearly as reliant on this airplane decide to make a statement saying, we're not going to use it, what kind of pressure would that put on southwest? >> why don't they just switch to airbus >> yeah, tomorrow -- >> just retrain all of our pilots and mechanics >> we'll put in an order, i'm sure they'll have them there by friday >> this is a company that's fully dependent on boeing, i guess, is my point so they get hit hard >> i won't be here to have fun with you on the "closing bell," so you'll have to do it on your own. what have you got? >> well, you better watch. this is going to be a big day. it's all the must-have earnings. we have a big guest coming up. h hay kyle bass will be here to talk about his thoughts on the market he's made a few big bets against the hong kong dollar which that one hasn't panned out. and here's the earnings lineup doesn't get more exciting than this, guys we've got reports from alphabet, amazon, intel, starbucks, expedia and many more.

we'll be all of those results as soon as they hit, 3:00 p.m. eastern. >> you're going to have your hands full tonight that's for sure. >> when we come back, roger mcnamee is back to talk more about facebook in light of the quarter which we now have under our belts. and we continue to sort of pare these losses dow dn isow61 "squawk alley" starts in a minnesota. memory support brand. you can find it in the vitamin aisle in stores everywhere. prevagen. healthier brain. better life.

...or trips to mars. $4.95. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade.

good morning it is 8:00 a.m. at tesla headquarters in palo alto, california, 11:00 a.m. on wall street and "squawk alley" is live ♪ ♪ good thursday morning. welcome to "squawk alley." i'm carl quintanilla with deirdre bosa